Pub giant Greene King's managed sites have struggled with a challenging first half of the year (24 weeks to 15 October 2017) amid a tougher trading environment and "unprecedented" cost pressures.
In an update to the City today, Greene King reported a 1.2% fall in group revenue to £1.03b. Adjusted profit before tax was down 8% to £127.9m.
Greene King said that its 1,200 tenanted and leased Pub Partners, as well as its Brewing and Brands and Local Pubs divisions outperformed the markets. Pub Partners' like-for-like net profit rose by 1.5% and Brewing & Brands own-brewed volume was up by 0.3%. However, trading was tougher for its 1,800-strong managed Pub Company division, where like-for-like sales were down 1.4%. Total revenue fell 2.2% to £837m.
Greene King said that UK consumers were spending more cautiously and "unprecedented" cost pressures. It said its Pub Company division had traded below the market due in part to its exposure to value food and its estate being more exposed to poor August and September weather, as well as increased competitor discounting and its decision to defer brand optimisation capital expenditure in the previous financial year.
It added that its Pub Company volume trends improved after the period end, following a £10m investment in value, service and quality.
Meanwhile, deposited Christmas bookings are up 3% on last year.
Rooney Anand, chief executive of Greene King, said: "The first half was challenging for our managed pubs, but our actions to strengthen performance have produced an improvement since the period end. We have committed additional investment to enhance the customer experience, including being more competitive on price, having more team members available at key times and strengthening local marketing activity. Pub Partners and Brewing & Brands again outperformed the market, generating cash for the group and raising the profile of Greene King.
"We will continue to benefit from our ability to generate significant cost savings and to improve investment returns to over 25% from rebranded pubs. Greene King is a strong, competitive business with industry-leading brands, a strong and flexible balance sheet, a sustainable dividend and an excellent track record of outperforming in challenging conditions. We are adapting our strategy to ensure we continue to sustain our long-term competitiveness, strong cash generation and attractive returns to shareholders."
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